Coca-Cola (NYSE:KO), headquartered in Atlanta, has raised its full-year sales forecast after an unexpectedly robust performance in the third quarter. The company now anticipates organic revenue growth of 10% to 11% for the year, up from the 8% to 9% guidance initially provided at the end of the second quarter. Additionally, Coca-Cola expects earnings (adjusted for currency fluctuations) to grow by 13% to 14%, an increase from its previous forecast of 9% to 11%.
In response to this positive news, Coca-Cola’s shares saw a 3% increase in morning trading on Tuesday.
For the July-September period, Coca-Cola reported a 2% rise in global case volumes. The company witnessed the most substantial growth in coffee sales, particularly in the United Kingdom and China. Sales of Coca-Cola Zero Sugar increased by 3%, fueled by rising demand in Latin America and North America. Sports drink sales also saw a 3% increase.
While water sales rose by 1%, tea sales experienced a 1% decline due to reduced demand in Turkey and Latin America.
In North America, case volumes remained flat. Although there was growth in sparkling drinks, juices, and dairy products, including brands such as Fairlife and Minute Maid, this was balanced by declines in other categories, including water and sports drinks.
Coca-Cola continued its strategy of raising prices to offset higher ingredient costs, although this was done at a more moderate pace. Prices increased by 9% in the most recent quarter, compared to the double-digit hikes that Coca-Cola had implemented in the preceding five quarters.
Coca-Cola’s Chairman and CEO, James Quincey, noted that some price-conscious consumers, especially in Europe, were opting for private label brands or discount stores. In the United States, consumers exhibited strong demand at restaurants, stadiums, and other venues despite budget constraints on home consumption.
According to Quincey, consumer spending on soft drinks in China has not yet fully recovered to pre-COVID levels. In response, Coca-Cola discontinued some less profitable drinks in China during the third quarter to focus on more popular beverages in preparation for the upcoming Chinese New Year in early 2024.
Coca-Cola reported a net revenue increase of 8% to $11.95 billion for the July-September period, surpassing Wall Street’s expectations of $11.4 billion, according to FactSet analysts.
The company’s net income rose by 9% to $3.1 billion. When adjusted for one-time items, Coca-Cola’s earnings were 74 cents per share, outperforming analysts’ projections of 69 cents.
Higher marketing expenses had a slight impact on Coca-Cola’s profits, with the operating margin dropping to 27.4% compared to the previous year.
Quincey emphasized that marketing plays a vital role in driving Coca-Cola’s growth. The company is increasingly focusing on digital advertising, which now constitutes 60% of its total ad spending, a significant increase from less than 30% in 2019. Quincey pointed out that digital advertising is crucial for capturing the attention of Generation Z consumers who spend up to nine hours a day on screens but rarely watch traditional television.
In line with this positive trend, PepsiCo, a rival of Coca-Cola, also raised its full-year earnings forecast earlier this month following a stronger-than-expected third quarter.
Featured Image: Unsplash @ James Yarema
Author Stephanie Bédard-Châteauneuf 
